The 2023/24 tax brackets will be adjusted in line with the expected inflation rate of 4.9%, says Finance Minister Enoch Godongwana.
Personal income tax tables are reviewed annually to ensure that inflation does not automatically push personal income taxpayers into higher tax brackets, the Minister said while delivering the 2023 Budget Speech at the Cape Town City Hall on Wednesday.
As a result, the annual tax-free threshold for a person under the age of 65 will increase to R95 750 from R91 250.
In the Budget Review, the National Treasury said if the brackets were not adjusted, revenue would have increased by about R15.7 billion.
“Relief mainly benefits middle-income households,” it reads.
Meanwhile, the South African Revenue Service (SARS) will increase medical tax credits from R347 to R364 per month for the first two members, and from R234 to R246 per month for additional members.
Adjustment of transfer duty and retirement tax tables
As part of the periodic reviews of monetary values in tax tables, the brackets for transfer duties, retirement fund lump sum benefits and retirement fund lump sum withdrawal benefits will all be adjusted upwards by 10% to compensate for inflation, it was revealed.
In this regard, tax rates remain unchanged.
Two-pot retirement system
The Minister announced that, following extensive public consultation, the first phase of legislative amendments to the retirement system would take effect on 1 March 2024.
The Treasury said the intent of these amendments was to enable pre-retirement access to a portion of one’s retirement assets, while preserving the remainder for retirement.
“Retirement fund contributions will remain deductible up to R350 000 per year or 27.5 % of taxable income per year – whichever is lower,” reads the Budget Review.
It said permissible withdrawals from funds accrued before 1 March 2024 would be taxed according to the lump sum tables.
Withdrawals from the “savings pot” before retirement, it said, would be taxed at marginal rates.
“On retirement, any remaining amounts in the savings pot will be taxed according to the retirement lump sum table (for example, R550 000 is a tax-free lump sum on retirement).
“Four areas required additional work: a proposal for seed capital, legislative mechanisms to include defined benefit funds in an equitable manner, legacy retirement annuity funds and withdrawals from the retirement portion if one is retrenched and has no alternative source of income,” the document reads.
It added that the first three matters would be clarified in forthcoming draft legislation. The final matter would be reviewed as a second phase of implementation. – SAnews.gov.za
